Ruling tosses insurer's claim

Both husband, wife needed to sign pact for corporate bond

Bonding companies that hope to collect what they are owed from a husband and wife had better be sure they get both signatures on the contract.

The Arizona Court of Appeals has thrown out claims by RLI Insurance Co. that it is entitled to get money from Thomas and Laurie Bilyea in an indemnity bond.

The judges said his signature on the contract, absent hers, makes legally meaningless the pledge of the marital community to pay.

Court records show Thomas signed an agreement in 2006 as part of his application for a contractor's license and sales-tax bond.

In doing so, he agreed to indemnify RLI in connection with any bond the company executed on behalf of Paradise Home Builders LLC.

In essence, that agreement was that if the company paid out any money based on a bond it wrote, he, his "marital community" and the company would provide reimbursement.

"Marital community" refers to the couple's community property, or assets. Arizona is a community-property state.

The language of the agreement said he was signing personally, on behalf of his marital community and in his corporate capacity. His wife was not a corporate officer of Paradise Home Builders and did not sign the agreement.

Justice Court complaint

In 2010, RLI filed a complaint in Justice Court alleging it had paid a claim and now was entitled to the $5,772 paid, plus interests and costs.

The company named Paradise Home Builders and both the husband and wife in the lawsuit, alleging he was acting on behalf of the marital community.

The couple responded by arguing that neither the wife nor the community property could be bound by the agreement.

A trial judge in Superior Court, where the case eventually was transferred, sided with the insurance company and directed that it could recover from the couple.

Appellate Judge Andrew Gould, writing for the unanimous court, said that ruling was wrong.

He said it is clear in Arizona law that one spouse cannot obligate the marital community in any indemnification or guaranty to make a payment.

"We have found that the plain meaning of this statute is clear," Gould wrote.

And he said the fact that the document Thomas signed said he was doing it for himself and his wife is legally irrelevant.

But although ruling against the insurance company, the appellate court rejected the wife's argument that the company should be punished based on her claim that it fraudulently named her as a party.